9 de la indulgencia a las consecuencias walker smith tfc

From Indulgence
To Consequences:
The Global Implications of Changing
Perceptions of Economic Risk

Insights into Innovation and Value
From The Futures Company
Global Monitor 2009

Presented by:
J. Walker Smith
Executive Vice Chairman

Follow jwalkersmith on Twitter

© 2009 The Futures Company 0 www.thefuturescompany.com

Muchas Gracias

Thank you very much...
To AMAI for inviting me to speak

To the Chair of the Organizing Committee
Alejandro Mondragon, Managing Director,
TNS/RI-Mexico

To all of you!



Today‟s Theme...

Because of the current recession,
marketing innovation will be much more
important in the future global economy.

In particular, value perceptions are
undergoing radical change.
This will require more innovative
marketing research insights.



Look Ahead...Not Back

Planning now for a
Recovery Marketplace
not a Recession Marketplace.



We may be researching the wrong questions...

Success – even in this
global downturn – is not
just about having the
cheapest price...

...and especially not as
we look towards the
recovery marketplace
Pre-recession Recession



A Global Narrative... with Local Implications

• This recession has not been the same everywhere
• But unlike past recessions, it has been global in scope
• An „economic pandemic‟ that began in the U.S. and
then infected the rest of the world
• What matters most are the local implications of this
global downturn
• Yet, there are valuable insights into local situations –
and local opportunities – that can only be seen from a
global perspective



The Global Recession of 2008/2009

• An unprecedented economic downturn
– The first global recession since the 1930s – Every
country affected to some degree

– The World Bank predicts that in 2009, global GDP will
contract 2.9% – the first global contraction since WW2

– The World Trade Organization predicts that 2009 global
trade will decline 10% – the largest drop in 60 years

• Yet...this was not supposed to happen!



Economists were pretty sure of themselves...

Robert Lucas, University of Chicago economist and
Nobel laureate, in 2003 address:

“Macroeconomics was born...in the 1940s, as a part of
the intellectual response to the Great Depression...that
we hoped would prevent the recurrence of that...disaster.

“[M]acroeconomics in this...sense has succeeded. Its
central problem of depression-prevention has been
solved.”



Alas...

How Did Economists Get It So Wrong?
New York Times Magazine, September 2, 2009

What Went Wrong with Economics?
The Economist, July 16, 2009
What Good are Economists Anyway?
Business Week, April 16, 2009



Consumers all around the world have been
touched by the recession

• For some, this has meant
coping with a harsher
economic climate

• For others, this has meant
fear of what may come

• For all, this means greater
uncertainty about what‟s ahead

• Crucial to understand what this
means for the future of brands



Understanding Futures is Our Mission

Global
Knowledge &
Trends &
• Global MONITOR Intelligence Futures

• Global Streetscapes Future-facing
Research

 A platform of insights
for brand-specific Unlocking Futures
consulting & research through
Layered Solutions



The Futures Company Global MONITOR

Illustrative results for 7 countries:
Mexico Brazil
United States India
United Kingdom China
• 20-country coverage (all regions)
France
• Tracking Global Energies worldwide
Data have been standardized to enable
• Plus in-depth topical focus: Health,
proper cross-country comparisons
Sustainability, Generations, Economy
• Supporting scenarios, strategic
planning, consulting & research


The Range of Impact from the Recession
2007 2008 2009 2010
GDP chg GDP chg GDP chg GDP chg
(act) (act) (est) (est)

Mexico 3.3% 1.4% (5.8%) 1.7%
United States 2.0% 1.1% (3.0%) 1.8%
United Kingdom 3.0% 0.7% (5.0%) 0.5%
France 2.3% 0.3% (3.5%) 0.4%
Brazil 5.7% 5.1% (1.1%) 2.5%
India 9.0% 6.1% 5.1% 8.0%
China 13.0% 9.0% 6.5% 7.5%
Source: The World Bank



The Global Energies
10 macro trends shaping consumer lives everywhere
that have unique expressions in individual countries



The Futures Company Global Energies Framework
Expression
Driver

Expression
Driver
Expression

Driver
Expression

Large-scale economic, Trends are the Marketplace
demographic, socio- consumer values that manifestations of a
political and arise in response to Global Energy that
technological factors the drivers and which show dimensions and
shaping people‟s are expressed in nuances of business
lifestyles and needs. consumer choices. opportunities.



Trends are Bending...Not breaking

• Recession notwithstanding, the Global Energies
remain strong – Not fads...will outlive downturn

• But the Global Energies have been affected by
the recession – Drivers have changed

• The Global Energies have not been broken by the
recession, but they are bending



Living With Economic Risk

• Drivers have changed
No longer just personal risks.
Economic risk has re-emerged as
a primary concern.

• Manifestations are new
Frugality more widespread.
But it is more than frugality.
It is a change in aspirations,
value, decision-making and the
importance of brands.

• A global phenomenon
with local implications
Today, I will look globally.
But for clients, we look locally.



Eras of Economic Risk Perceptions

Era of Readiness Era of Indulgence Era of Consequences
Economic risk ever Risk manageable with Risk abruptly returns
present despite best new, high-tech unexpectedly, creating
efforts to manage it. economic tools. uncertainty about situations.
Standing on guard. Indulging risk. Reassessing risk.

Value found in… Value found in… Value found in…

NEW FRONTIERS TRADING UP RESPONSIBILITY



Financial Perceptions
100
Coping
Strategies:
Things are going very/fairly financially
90

Scrutinizing
well in your country these days 80

70

60

50
Coping
Strategies:
40 Budgeting
Coping
30
Strategies:
20 Delaying
10
Source: The Futures Company
Global MONITOR (selected countries)

0
10 20 30 40 50 60 70 80 90 100
Things are going very/fairly well with your
personal financial situation these days


Uncertainty has made consumers more
thoughtful about their shopping

• More cautious and careful
• Less frivolous with money or
debt

• But consumerism not dead!
– Still aspire to better lives

– Still motivated by better
products and experiences



In other words, what‟s changing is the
definition of value

• Consumers want better prices,
but have not become frugal

• Instead, consumers are
redefining what is worth paying
a premium for

• The new dynamic is
prioritization, which makes
innovation more important!

– Brands need an innovative
difference that takes top
priority

Brands face extra pressure from low-price
brands during economic downturns

• Lien Lamey, Assistant Professor,
Marketing, Lessius Hogeschool, Belgium
– Studied business cycles from 1971 to 2003
in the U.S., from 1980 to 2003 in the U.K.
and from 1975 to 2002 in Germany

• Main finding:

– Private-label brands enjoy
“asymmetrical” share gains
during economic downturns
• Key question: How to mitigate private-
label share gains during recessions?



Innovation is the single most important thing
to do during economic downturns

• Lien Lamey, Assistant Professor, Marketing,
Lessius Hogeschool, Belgium
– Studied 92 FMCG categories from 1985
to 2005 in the U.S.

• Main finding:
– Single best way to stop share loss to
private-label brands is to increase
“significant” marketing innovation
• Marketing imperative: Innovate, innovate,
innovate!



The Overhang of Uncertainty

Economic
risk returns
• Consumers
Uncertainty want some-
thing new
unleashed
• Habits &
preferences
Reconsideration in transition
& reinvention • A market-
place where
everything
Value equation
is new
reconfigured

A „perfect storm‟
for INNOVATION




I have become more conservative in how I spend my money because of actual
changes in my financial situation such as a loss of income or assets or
because I fear what might happen to my financial situation in the year ahead

72% 70%
69%
63% 61%
60%
50%
43%

Global Mexico US UK France Brazil India China
Average
Source: The Futures Company Global MONITOR (selected countries)




I am happy to have short-term debt to
allow me to buy the things I want

Down
Down 6%
11% Down
points 4%
points Down
Down points
8% Down 4%
points 9% points Down 48% UP
46% points 9% 2%
points 38% points
33%
29% 30%
25% 28%

Average



Perceptions of Overall Risk

Lately, I‟ve become more likely to consider
the potential risks of each decision I make

51% 55% 56% 47% 46% 57% 48% 41%
Global
Average



Perceptions of Overall Risk
I like to take part in activities that have an element of risk or adventure

2008 2009
Global Average 38% 32%

Mexico 47% 41%
United States 39% 34%
United Kingdom 35% 32%
France 36% 30%
Brazil 41% 37%
India 50% = 50%
China 29% 27%
Follow jwalkersmith on Twitter Source: The Futures Company Global MONITOR (selected countries)


Uncertainty Pervasive

The world I live in feels like an increasingly
hostile and uncertain place

75%
68%
66%
60% 61%
58%
54%

37%

Average



Money is losing value as a measure of success
The amount of money you have is the best measure of personal success

2008 2008 2008

30% 20% 36%
2009 2009 2009

Global 28% 16% 35%
Average

2008 2008 2008

32% 19% 50%
2009 2009
2009
27% 18% 46%
2008 2008

22% 51%
2009 2009

17% 47%



Price vs. Luxury Shifting
Important in personal life today to Always looking for more luxury,
get best price on everything I buy even in everyday products

2008 2009 2008 2009
Global Average 51% 56% 21% 18%

Mexico 50% 54% 23% 15%
United States 65% 66% 20% 16%
United Kingdom 55% 61% 20% 17%
France 48% 56% 11% 7%
Brazil 59% 62% 16% 18%
India 61% = 61% 39% 37%
China 40% 47% 23% = 23%


Basic product utility making a comeback
A product‟s style and design is as important as its performance

2008 2009
2008 2009
38% 47%
47% = 47% 2009 2008

Global 35% 44%
Average

2008 2008 2009 2008

62% 52%
2009
34% = 34% 2009

56% 46%
2008 2008

34% 65%
2009 2009

27% 63%


Yet...No loss of interest in experiences

Important in personal life today to live life to the maximum

Down
UP 1%
UP 8% points
3% UP
UP points Down
points 8%
UP points 8% 1% 80%
Down
4% points 74% 14%
points
points 72%
68% points
65% 64%
63%
58%

Average



Yet...No loss of interest in fulfillment
Important in personal life today to Important in personal life today
strive to reach full potential to express creative side

2008 2009 2008 2009

Mexico 75% 82% 60% 71%
France 59% 67% 35% 41%
Brazil 78% 83% 62% 73%
India 62% 67% 54% 60%
China 67% 77% 64% 69%


Yet...No loss of interest in self-enhancement
Important in personal life today to Important in personal life today
be in control of your life to schedule time for me

2008 2009 2008 2009

Mexico 83% 86% 74% 78%
France 79% 81% 61% 70%
Brazil 82% 84% 69% = 69%
India 74% 76% 60% 61%
China 80% 79% 79% 75%


Interest in meaningful innovation undiminished

I like to try new products and services (versus I prefer to
stick with the products and services I have always used)

80% 79%
67%
65% 64%
62%
58% 59%

Average


Summary: Post-Recession Value Scorecard

More Less No Less
Important Important Important

Price  Luxury  Experiences 
Performance  Badge  Control 
Design  Balance 
Fulfillment 
New products 
Creativity 
Responsibility 



Not simply about price...It‟s about total value

Shelter
• This is about the search by Clothes
Medicine
consumers for a new value
equation in light of uncertainty
Utilities: Food News-
Vacation Electric paper
• Opportunities & implications & Water
for savvy marketers Cell Car
Computer phone

• Will review a few selected Eating
out
ideas, with illustrations from Internet
TV
Global Streetscapes network Entertai
n-ment



Global Streetscapes Intelligence Network
46 cities across 28 countries worldwide
Stockholm

London

Moscow
Dublin
Vancouver Montreal Munich
Seattle Amsterdam Paris
Portland Toronto
Chicago Detroit
San Francisco Barcelona Rome Istanbul Seoul
New York Athens Shanghai
Denver Philadelphia
Los Angeles Tokyo
San Diego Austin
New Delhi Beijing
Miami Dubai
Hong Kong
Mexico City Mumbai
Bangkok
Bangalore

Bogotá Lagos Kuala Lumpur

Rio de Janeiro
São Paulo Johannesburg
Auckland
Sydney
Buenos Aires

www.thefuturescompany.com

Some Key Ideas & Implications
1. Practice optimism – In uncertain times, be a
positive voice in the marketplace
2. Reduce the risk and resources required to
do business with you
3. Put renewed emphasis onimplications for the
Plus...A few functionality,
performance and basic utility
practice of marketing research
4. Transform economizing into a badge of
success & savvy
5. Increase the control consumers feel buying
your brand
6. Win loyalty – don‟t buy it – through greater
innovation


1: Practice Optimism

• Consumers are anxious
Tuesday, March 31, 2009
but not defeated
“Don’t Worry, Buy Happy: Cheerful
• They want to bond with Stuff Sells Well These Days”

inspirational brands

– Offer empathy, practical
solutions and resolve

– And make it fun!




• Give people hope

• Offer a positive way
forward

• Remember that deep
discounting reeks of
desperation



Relax – Brazil
Brazilian cosmetics giant
• Offer a chance to ease the Natura recently placed 3 big
words in strategic spaces in
pressure and stress the city of São Paulo: Relax,
Rest, Calm. The campaign is
considered to be an indirect
• Offer small indulgences reference to the financial
downturn but also a reference
that don‟t require big to the stressful life in the city.
commitments or complex
decisions Happiness sale – India
The shopping chain Central has
come up with the „Happiness‟
sale to encourage consumers to
take people‟s minds off the
downturn. The copy reads “I am
ready for my happiness
challenge. Are you?” reflecting
exuberance and a positive
attitude.




• Be irreverent
Save the Traders – France
• Connect with the outrage Volkswagen‟s recession-themed „Save
the Traders‟ viral campaign shows a
group of now-unemployed stock
market traders singing a telethon-style
anthem asking the public to „open their
hearts, and their wallets too‟ and give
to impoverished traders who have lost
their sports cars and private jets.

Sadness, please go away – Brazil
In fhe new advertising campaign from
Havaianas sandals, a waitress asks a
group of young people to stop singing and
playing instruments because the world is in
the middle of an economic crisis and
everyone should be serious and sad. After
a brief pause, the group launches into a
joyful rendition of the song „Tristeza por
favor vai embora‟ („Sadness, please go
Follow jwalkersmith on Twitter away‟).


2: Reduce Risks & Resources

• Make doing business with
your brands risk-free

– Guarantee satisfaction

– Simplify complexity

– Minimize potential losses

– Boost service levels
Sachet marketing, Asia
Smaller, single-use
packaging formats reduce
the costs of trial.



4: Transform Economizing Into Smarts

• Celebrate saving as savvy

• Transform trading down
into a new form of trading Honest Little Bear – Fiat
up Fiat eco:Drive campaign promotes
the financial and environmental
benefits of Fiat. New device tracks
driving habits to help drivers become
more fuel efficient. Joint new product
of Fiat & Microsoft.

eBags presents the
recessionista, n.: A woman
who dresses stylishly on a
tight budget. “Stay trendy
(but less spendy) with our
Summer Handbag Sale.”
ebags.com 8.06.08


6: Innovate

• Aim higher not lower

• Let consumers save money
elsewhere...to spend on
your brands
OR
• Stay at the top of the
priority list with innovative
reasons to buy



6: Innovate

Home Classics soups – Russia

• Keep adding value
As consumers go back to making
their own soups, Campbell‟s
innovated with the Home Classics
• Make no compromises line of ingredients containing the
“foundation” for soups consumers
can make themselves.
• Deliver more not less
Panera Bread – US
As restaurants struggle with drops
in visits and check sizes, Panera
continues to invest more. As CEO
Ron Shaich puts it, “This is the
time to increase the food
experience.” As a result, Panera
same-store sales are up 3.4%.



6: Innovate

Innovative & cheap shaving
solutions – UK
• Don‟t simply cut prices – Use The King of Shaves Azor uses
an innovative flex mechanism in
innovation as the way to the handle to sell blades at half
increase price/value the price of competitors. In the 4
weeks ending April 18th, it the
4th best-selling UK brand of 17.
• Not just the product, but all
aspects of the offering such
as packaging Activia multi-packs – Russia
In response to consumers cutting
back on indulgent purchases,
Activia has increased its multi-
packs from 4 tubs to 6 to target
loyal consumers with better
price/value.



Trends pinpoint innovative sources of value

• All brands will be looking to
prove their worth to
consumers.
• Using a trends framework like
the Global Energies is a
means of thinking about value
in new, innovative ways
• As well as staying on top of
how trends will bend as the
global economy recovers



Marketing Research Reinvented
• Some old concepts need updating
– Example: “Consideration set”

• Norms for success must be ratcheted up
– 99th percentile not 50th percentile or greater

• Global view essential (even for domestic planning)
– Other countries can provide crucial out-of-the-box ideas

• The size of the economy must be figured in
– No more researching category purchasing in isolation – The
entire „shopping cart‟ defines category competition

• An innovation process must define the core of research
– Excellence not merely adequacy is the objective


In short...

Plan for the Recovery
& A New Era of Innovation

Thank You!
www.thefuturescompany.com



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